Correlation Between KAT Exploration and UMF

Can any of the company-specific risk be diversified away by investing in both KAT Exploration and UMF at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining KAT Exploration and UMF into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KAT Exploration and UMF Group, you can compare the effects of market volatilities on KAT Exploration and UMF and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in KAT Exploration with a short position of UMF. Check out your portfolio center. Please also check ongoing floating volatility patterns of KAT Exploration and UMF.

Diversification Opportunities for KAT Exploration and UMF

0.17

Correlation Coefficient

KAT Exploration  UMF

Average diversification

The 3 months correlation between KAT and UMF is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding KAT Exploration and UMF Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMF Group and KAT Exploration is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on KAT Exploration are associated (or correlated) with UMF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UMF Group has no effect on the direction of KAT Exploration i.e., KAT Exploration and UMF go up and down completely randomly.

Pair Corralation between KAT Exploration and UMF

If you would invest  0.18  in KAT Exploration on October 3, 2024 and sell it today you would lose (0.15) from holding KAT Exploration or give up 83.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	0.37%
Values	Daily Returns

KAT Exploration  vs.  UMF Group

KAT Exploration

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KAT Exploration are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, KAT Exploration showed solid returns over the last few months and may actually be approaching a breakup point.

UMF Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UMF Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, UMF is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with KAT Exploration and UMF

The main advantage of trading using opposite KAT Exploration and UMF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KAT Exploration position performs unexpectedly, UMF can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in UMF will offset losses from the drop in UMF's long position.

The idea behind KAT Exploration and UMF Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.